Question 1

Participating in a seminar that helps to improve your performance at work represents an investment in your ________ capital.

Accepted Answer

A)  human 
B)  social 
C)  tangible 
D)  financial 
A)  human 
B)  social 
C)  tangible 
D)  financial A

Question 2

Venture capital funds involve very low risk.

Accepted Answer

A) True 
 B)False  False

Question 3

The firm should continue investing

Accepted Answer

A)  even if the MRPK is equal to its rental cost. 
B)  only as long as the MRPK is less than its rental cost. 
C)  up to the point where the MRPK equals its rental cost. 
D)  only as long as its rental cost is greater than the interest rate. 
A)  even if the MRPK is equal to its rental cost. 
B)  only as long as the MRPK is less than its rental cost. 
C)  up to the point where the MRPK equals its rental cost. 
D)  only as long as its rental cost is greater than the interest rate. C

Question 4

You will agree to lend your sister's grandma's daughter $2,000 for a year, if at the end of the year she pays you $2,200. The interest rate you are charging her is

Accepted Answer

A)  1.1%. 
B)  9.09%. 
C)  10%. 
D)  20%. 
A)  1.1%. 
B)  9.09%. 
C)  10%. 
D)  20%.

Question 5

You agree to lend a friend $15,000 for a year at an annual interest rate of 20%. At the end of the year your friend must pay you ________ in interest.

Accepted Answer

A)  $133 
B)  $750 
C)  $1,500 
D)  $3,000 
A)  $133 
B)  $750 
C)  $1,500 
D)  $3,000

Question 6

Refer to the data provided in Table 11.3 below to answer the following question(s).
Table 11.3
Project Total Investment Expected Rate of Return
(dollars) (percentage)
 $$\begin{array} { l l r } 
\text { New computer for sales staff } & \$ 250,000 & 11 \
\text { Remodel for distribution center } & \$ 200,000 & 9 \
\text { On-site day care center } & \$ 100,000 & 5 \
\text { Employee fitness center } & \$ 50,000 & 4
\end{array}$$
-Refer to Table 11.3. If the interest rate is 14%, Blackstar Drone Manufacturing should

Accepted Answer

A)  fund all of the projects. 
B)  fund the remodeling of the distribution center and the on-site day care center. 
C)  fund only the purchase of new computers for its sales staff. 
D)  not fund any of the projects. 
A)  fund all of the projects. 
B)  fund the remodeling of the distribution center and the on-site day care center. 
C)  fund only the purchase of new computers for its sales staff. 
D)  not fund any of the projects.

Question 7

Refer to the data provided in Table 11.3 below to answer the following question(s).
Table 11.3
Project Total Investment Expected Rate of Return
(dollars) (percentage)
 $$\begin{array} { l l r } 
\text { New computer for sales staff } & \$ 250,000 & 11 \
\text { Remodel for distribution center } & \$ 200,000 & 9 \
\text { On-site day care center } & \$ 100,000 & 5 \
\text { Employee fitness center } & \$ 50,000 & 4
\end{array}$$
-Refer to Table 11.3. If the interest rate is 12.5%, Blackstar Drone Manufacturing's total investment would be

Accepted Answer

A)  $0. 
B)  $50,000. 
C)  $250,000. 
D)  $550,000. 
A)  $0. 
B)  $50,000. 
C)  $250,000. 
D)  $550,000.

Question 8

A firm can invest in one of two projects-the purchase of new delivery vans or the training of its sales staff in the use of new sales techniques. Both projects cost the same amount of money. The purchase of new delivery vans is expected to reduce costs by $5,000 each year for 10 years. The training of the sales staff in the use of a new sales technique is expected to increase revenues by $5,000 each year for 5 years. Which of the following is true?

Accepted Answer

A)  Each of these projects would have the same expected rate of return, as they both cost the same. 
B)  The training of the sales staff would have the higher expected rate of return, as it increases revenues whereas the purchase of delivery vans only reduces costs. 
C)  The purchase of delivery vans would have the higher expected rate of return, as it will reduce costs for a longer time period than the sales staff training will increase revenues. 
D)  The expected rates of return for these two projects cannot be compared, as one project reduces costs and the other increases revenues. 
A)  Each of these projects would have the same expected rate of return, as they both cost the same. 
B)  The training of the sales staff would have the higher expected rate of return, as it increases revenues whereas the purchase of delivery vans only reduces costs. 
C)  The purchase of delivery vans would have the higher expected rate of return, as it will reduce costs for a longer time period than the sales staff training will increase revenues. 
D)  The expected rates of return for these two projects cannot be compared, as one project reduces costs and the other increases revenues.

Question 9

The higher the interest rate, the lower the present value.

Accepted Answer

A) True 
 B)False

Question 10

As the inventory of a firm rises

Accepted Answer

A)  there is no change in its capital. 
B)  its intangible capital increases. 
C)  its tangible capital increases. 
D)  its social capital decreases. 
A)  there is no change in its capital. 
B)  its intangible capital increases. 
C)  its tangible capital increases. 
D)  its social capital decreases.

Question 11

A software company writes a better operating system for personal computers and earns very large profits on this operating system. Which of the following is true?

Accepted Answer

A)  The profits this firm earns are a return for an innovation. 
B)  The profits this firm earns aren't deserved, as the firm did not take any risks. 
C)  This firm must not be in a competitive market if it was able to earn a profit. 
D)  The firm must be a monopoly. 
A)  The profits this firm earns are a return for an innovation. 
B)  The profits this firm earns aren't deserved, as the firm did not take any risks. 
C)  This firm must not be in a competitive market if it was able to earn a profit. 
D)  The firm must be a monopoly.

Question 12

Refer to the data provided in Table 11.2 below to answer the following question(s).
Table 11.2 $$\begin{array}{l}
\begin{array} { l c c } 
&\text { Total Investment }&\text {Expected Rate of Return }\
 { \text { Project } } & \text { (dollars) } & \text { (percentage) } \
\hline \text { New bookkeeping software } & \$ 150,000 & 5 \
\text { New tractor } & \$ 200,000 & 12 \
\text { New grain storage tanks } & \$ 250,000 & 10 \
\text { Irrigation system } & \$ 500,000 & 15 \
\hline
\end{array}
\end{array}$$
-Refer to Table 11.2. When the interest rate ________, the farmer will engage in no investment.

Accepted Answer

A)  is greater than 15% 
B)  is less than 5% 
C)  is less than 15% 
D)  is greater than 5% 
A)  is greater than 15% 
B)  is less than 5% 
C)  is less than 15% 
D)  is greater than 5%

Question 13

If the interest rate is 7 percent, the value of $350 today after one year would be

Accepted Answer

A)  $357.00. 
B)  $362.50. 
C)  $374.50. 
D)  $387.75. 
A)  $357.00. 
B)  $362.50. 
C)  $374.50. 
D)  $387.75.

Question 14

A firm will continue investing up to the point at which the marginal revenue product of capital is equal to its rental cost.

Accepted Answer

A) True 
 B)False

Question 15

As a holder of a share of common stock, you are

Accepted Answer

A)  entitled to a portion of the firm's revenues. 
B)  entitled to a portion of the firm's profits. 
C)  entitled to a standard percentage return on your investment. 
D)  responsible for the liabilities of the corporation. 
A)  entitled to a portion of the firm's revenues. 
B)  entitled to a portion of the firm's profits. 
C)  entitled to a standard percentage return on your investment. 
D)  responsible for the liabilities of the corporation.

Question 16

If the interest rate is 9 percent, to get back $800 in one year you would need to deposit ________ today.

Accepted Answer

A)  $720.72. 
B)  $714.29. 
C)  $733.95. 
D)  $791.00. 
A)  $720.72. 
B)  $714.29. 
C)  $733.95. 
D)  $791.00.

Question 17

If the interest rate is 10%, the current market value of $1 to be delivered in one year is

Accepted Answer

A)  $0.91. 
B)  $0.99. 
C)  $1.00. 
D)  $1.10. 
A)  $0.91. 
B)  $0.99. 
C)  $1.00. 
D)  $1.10.

Question 18

Refer to the information provided in Figure 11.1 below to answer the question(s) that follow.   Figure 11.1
-Refer to Figure 11.1. If the market rate of interest is 8%, this firm's investment will total

Accepted Answer

A)  $5,000. 
B)  $7,000. 
C)  $12,000. 
D)  $15,000. 
A)  $5,000. 
B)  $7,000. 
C)  $12,000. 
D)  $15,000.

Question 19

In the capital market, households ________ savings and firms ________ funds.

Accepted Answer

A)  demand; supply 
B)  demand; demand 
C)  supply; supply 
D)  supply; demand 
A)  demand; supply 
B)  demand; demand 
C)  supply; supply 
D)  supply; demand

Question 20

The most important dimension of capital is

Accepted Answer

A)  immediate returns. 
B)  depreciation. 
C)  the interest rate. 
D)  time. 
A)  immediate returns. 
B)  depreciation. 
C)  the interest rate. 
D)  time.

Participating in a seminar that helps to improve your performance at work represents an investment in your ________ capital.

Venture capital funds involve very low risk.

The firm should continue investing

You will agree to lend your sister's grandma's daughter $2,000 for a year, if at the end of the year she pays you $2,200. The interest rate you are charging her is

You agree to lend a friend $15,000 for a year at an annual interest rate of 20%. At the end of the year your friend must pay you ________ in interest.

The higher the interest rate, the lower the present value.

As the inventory of a firm rises

A software company writes a better operating system for personal computers and earns very large profits on this operating system. Which of the following is true?

If the interest rate is 7 percent, the value of $350 today after one year would be

A firm will continue investing up to the point at which the marginal revenue product of capital is equal to its rental cost.

As a holder of a share of common stock, you are

If the interest rate is 9 percent, to get back $800 in one year you would need to deposit ________ today.

If the interest rate is 10%, the current market value of $1 to be delivered in one year is

Refer to the information provided in Figure 11.1 below to answer the question(s) that follow. Figure 11.1 -Refer to Figure 11.1. If the market rate of interest is 8%, this firm's investment will total

In the capital market, households savings and firms funds.

The most important dimension of capital is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 11: Input Demand: the Capital Market and the Investment Decision

Participating in a seminar that helps to improve your performance at work represents an investment in your ________ capital.

Venture capital funds involve very low risk.

The firm should continue investing

You will agree to lend your sister's grandma's daughter $2,000 for a year, if at the end of the year she pays you $2,200. The interest rate you are charging her is

You agree to lend a friend $15,000 for a year at an annual interest rate of 20%. At the end of the year your friend must pay you ________ in interest.

The higher the interest rate, the lower the present value.

As the inventory of a firm rises

A software company writes a better operating system for personal computers and earns very large profits on this operating system. Which of the following is true?

If the interest rate is 7 percent, the value of $350 today after one year would be

A firm will continue investing up to the point at which the marginal revenue product of capital is equal to its rental cost.

As a holder of a share of common stock, you are

If the interest rate is 9 percent, to get back $800 in one year you would need to deposit ________ today.

If the interest rate is 10%, the current market value of $1 to be delivered in one year is

Refer to the information provided in Figure 11.1 below to answer the question(s) that follow. Figure 11.1 -Refer to Figure 11.1. If the market rate of interest is 8%, this firm's investment will total

In the capital market, households ________ savings and firms ________ funds.

The most important dimension of capital is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

In the capital market, households savings and firms funds.